Crude on boil again...nears U$142/bbl

Crude oil prices accelerated in the last two days of the week, touching a new all-time high of nearly US$142 per barrel in electronic trading. The August light crude contract traded as high as US$141.71 per barrel on Friday. It closed at a record US$139.64 in New York on Thursday. Prices jumped after OPEC president warned of higher oil prices, the dollar declined and Libya threatened reduction in crude output.

OPEC president Chakib Khelil, who is also Algeria's Energy Minister, said oil prices could jump as high as US $150 to US $170 dollars a barrel this summer. However, he thinks crude will fall short of US $200 a barrel. At a meeting in Paris, Khelil said a further fall of 1-2% in the dollar versus the euro could add another US $8 to oil prices. He cited the weakness of the greenback as a major cause of spiking oil prices.

Also, Libya threatened to cut oil output because of a US threat to its assets and an assumption that the oil market is oversupplied, according to Bloomberg. A US law allows terror victims to seize assets of foreign governments as compensation, the report said.

US dollar fell against most of its major rivals after the Federal Reserve held its benchmark short-term rate steady at 2%. The central bank sharpened its focus on inflation, saying that the risks posed to the economy by rising prices have increased. Oil may rise further if the ECB boosts rates on July 3, further weakening the US dollar. ECB President Jean-Claude Trichet said on June 25 that policy makers may increase rates by 25 bps next month to contain inflation.